Direction of Fund Advertising Debated

To get an idea of what mutual fund advertising may look like in the future, Mutual Fund Market News freelance reporter Lori Pizzani asked several marketing executives their views on the subject. Those interviewed included:

Mark A. Beeson, senior marketing director for the One Group Mutual Funds of Columbus, Ohio.

Catherine Bernard, director of corporate advertising and media for American Century Investments in Kansas City, Mo.

Gail Eisenkraft, director of retail at Warburg Pincus Mutual Funds of New York.

MFMN: Has mutual fund advertising significantly changed and, if so, in what ways?

Mark Beeson: Ads have changed, but they are still mostly performance driven. In the past, we saw tombstone ads. Now ads are more sophisticated. We are now seeing funky little ads that catch the eye. It's the dot-com influence. We are starting to see more brand ads and the "load effect" of ads promoting using an adviser. Fund companies are spending more on radio and television advertising.

Catherine Bernard: Previously, performance ads dominated; now there's more of a mixture of performance and image ads. With the increase in image advertising, television seems to be playing a greater role.

Gail Eisenkraft: It's far more cluttered now and expenditures have reached new heights. Everybody is in the game now. Some ads appear unchanged. But some are clearly attempting to break through.

Rui Moura: I think it has changed in a number of ways and it is changing for the worse. Fund ads are gimmicky now, not factual. For the past few years, we fund marketers have had to contend with Proctor & Gamble tactics in the advertising arena. That means we can no longer compete on [just] performance. Branding and positioning have become increasingly important. Now you see humor being injected, you see personalization and you see blind-faith advertising that says "give me your money because I am a big-name fund company."

Howard Schneider: Advertising is evolving as funds are maturing from hawking product to the need to establish a brand. There are two drivers at work here. The industry has recognized that the days of easily attracting assets are over. Also, there's an increasingly crowded marketplace with firms such as E*Trade and Schwab adding to the greater noise. It's all part of the industry's hyper-growth phase to maturity. And as consumers are maturing, their expectations are changing. The market is no longer homogenous. There are micro-segments to address.

Gavin Spitzner: I don't think fund advertising has truly changed all that much. Most firms still tend to go to one extreme or another - either pure performance or pure image. In my view, both are ineffective. Performance is a "cost of entry." There's no question you have to have it, but it is a commodity and generally doesn't make the sale.

Image without differentiation isn't effective either. "Brand" advertising is the buzzword these days and it's important. But not if it just means "name recognition" like all the dot-coms are notoriously unsuccessful [in achieving]. One significant improvement is that companies are integrating their fund advertising with other elements of their marketing plan. You are seeing ad designs and messages being mirrored on websites and collateral material.

MFMN: Do you believe that mutual fund advertising will further evolve over the next several years? If so, how will it change?

Beeson: I personally think market conditions will change and performance bands will narrow drastically. The messages will change to "let's talk asset allocation."

Bernard: Yes. As companies employ multiple channels of distribution, the nature of mass communication will need to change so that it is relevant to the different audiences in those channels.

Eisenkraft: Some ads are a function of the bull market. But, if the market changes, ads will change and become more conservative. Ads may increasingly send people to websites to find answers.

Moura: Yes. The value proposition isn't "why we are the best for you" or "here is what we stand for and why you need us." It will be more brand-oriented toward a general audience for the big boys and much more targeted for the small fellas. The big boys will own the television, radio and general magazine media. The small shops will have to use electronic means and will try to get the message out through trade pubs, conferences, regional and community media.